Confidential Information or Business Secrets

The “Non-disclosed Information” referred in TRIPS equals to the “Confidential Information” or “Business Secrets” within China. In my view, there are some connections and differences between confidential information and business secrets (as one part) and Non-disclosure Obligations (as another part), i.e. the different legal consequences may resulted from the breach of Non-disclosure Obligations under any contract and the infringement of business secrets, in particular, the civil, administrative or criminal liabilities may arising from the infringement of business secrets, provided, however, the breach of Non-disclosure Obligations (except the confidentiality of business secrets) under any contract may
only subject to the civil liabilities.

As stipulated in Article 10 of the Anti-unfair Competition Law of the People’s Republic of China: “Business Secrets means the utilized technical information and business information which is unknown by the public, which may create business interests or profit for its legal owners, and also is maintained secrecy by its legal owners.”

As have been stipulated in Article 10 of the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition:“In case the relevant information has actual or potential commercial value, and can bring competitive advantage for the legal owners, it shall be affirmed as “capable of bringing about benefits to the legal owners, and having practical applicability” prescribed in Paragraph 3 of Article 10 of the Anti-unfair Competition Law.”

Measures Taken on the Non-disclosure Obligations (Confidential Information and Business Secrets):

a) As have been stipulated in Article 10 of the Anti-unfair Competition Law of the People’s Republic of China:
Managers shall not use the following methods to infringe upon Business Secrets:
1. to steal, coerce, or use any other unfair method to obtain the other's Business Secrets;
2. to disclose, use or permit others to use the Business Secrets mentioned in Section 1 of this Article.
3. to violate the contract or the requirement to publish, use or permit others to use the business secrets, which were maintained as secrets by the legal owner of the Business Secrets.
The third Party who knows or should know the illegal activities as first mentioned, and who gains, uses or publishes the Business Secrets shall be looked as activities of infringing upon the others' Business Secrets.

b) As have been stipulated in Article 9 of the Interpretation of the Supreme People’s Court on Some Issues Concerning the Application of Law in the Trial of Civil Cases Involving Unfair Competition:
If it is under any of the following circumstances, it may be affirmed that the relevant information is not unknown to the public:
(1) The information is the common sense or industrial practice for the personnel in the relevant technical or economic field;
(2) The information only involves the simple combination of dimensions, structures, materials and parts of products, and can be directly obtained through the observation of products by the relevant public after the products enter into the market;
(3) The information has been publicly disclosed on any publication or any other mass medium;
(4) The information has been publicized through reports or exhibits;
(5) The information can be obtained through other public channels; or
(6) The information can be easily obtained without any price.

Constitutive Requirements of the Offense of Infringement of Business Secrets and Its Judicial Definition

On 9 May, 2008, a symposium on “the Constitutive Requirements of the Offense of Infringement of Business Secrets and Its Judicial Definition” was held by the Institute of the Law Firm of East China University of Political Science and Law. The experts in Criminal Law, Procedure Law, Civil Law, Administrative Law and Intellectual Property Law share their personal opinions about the topic. My former studies on the business secrets are basically based on the studies of Anti Unfair Competition Law. Through the communication with the experts, I have acquired further and more comprehensive knowledge of the legal practice of the laws about business secrets. In my opinion, when dealing with a criminal case of the offense of infringing upon business secrets involving know-how, the lawyer should particularly pay attention to the relevant problems as follows in the conclusion of authentication:

1. The conclusion of authentication about the Novelty Search

In practice, in a case involving certification of business secrets, firstly, the party will consign the case to the authentication institution to obtain an authentication report on whether the disputing business secret in the case is unknown by the public (the Novelty Search). It’s the most important conclusion in a case of business secrets. Only when the business secret in the case is recognized as “unknown by the public”, the case can be continued. For this kind of cases involving specialized technical knowledge, the lawyers and judicial organs usually neglect to study on the reliability and probative force of the conclusion of authentication. For example,

(1) Dose the induction of the know-how points measure up to the industry standard?
(2) Is the selection of the keywords of retrieval correct?
(3) Is the determination of the way and scope of retrieval objective and fair?

According to my former experience, the above 3 aspects affect the conclusion of authentication a lot. The induction of the know-how points involving in the case will directly affect the determination of the keywords of retrieval. Even if the keywords are correctly chosen, that the scope is too narrow or the way of retrieval (mainly the problem of the apportionment of the manual retrieval and the computer retrieval) is improper will affect the probative force of the conclusion of authentication.

2. The conclusion of authentication about “intercomparison”

If the involved know-how is recognized as business secret, the authentication institution should also authenticate whether the infringer has used that know-how. We call it “causality recognition” in law (intercomparison authentication). In the cross-examination about this kind of authentication conclusion, usually, experts of this industry should intervene. In a civil case, we can apply to the people’s court for having the experts appear in court to do cross-examination. According to Article 61 of Some Provisions of the Supreme People's Court on Evidence in Civil Procedures,
“The parties concerned may apply to the people's court to have one or two persons with professional knowledge to appear in court to make accounts of the specialized questions relating to the case. If the people's court approves such applications, the relevant expenses shall be borne by the party that makes the application.
The judges and parties concerned may interrogate the persons with professional knowledge that appear in court.
The persons with professional knowledge may interrogate the authenticators.”

However, in a criminal case, our Criminal Law does not seem to give the similar rights to the defendant. If there are no incidental civil actions in a criminal case, the defender has no legal basis to apply to the people’s court for having experts cross-examine the conclusion of authentication. Therefore, usually, the lawyer of a criminal case can only make a non-essential cross-examination of the conclusion of authentication without experts’ support. Nevertheless, according to Article 138 and Article 140 of Some Provisions of the Supreme People's Court on Criminal Procedure Law, the prosecutor and the defendant should summon expert witness to appear in court under the permission of the people’s court; for that both the prosecutor and the defendant can read the conclusion of authentication without the expert witness’s attendance, it makes the conclusion of authentication become the basis of conviction without cross-examination. Moreover, such defects of Procedure Law can easily hurt the defendant's rights.

3. The conclusion of authentication about the “damage result”

The damage result of business secret cases can be determined through the damage to the right or the properties obtained from the infringement. In practice, there are situations as follows:

(1) Evaluate the damage through the assessment value of the obligee’s business secret itself (for example, the research and development expenses of know-how, license fee of technique and so on);
(2) Evaluate the damage through the decrease of the obligee’s market share;
(3) Evaluate the damage through the interests that the infringer obtained from the business secret.

Due to the fact that there’s no definite and unified regulation in the judicial interpretation about the identification criteria of the damage result of business secret cases at present, we can receive different conclusions of authentication according to different calculation method. It brings great uncertain factors to the determination of damage result of business secret cases.

In a word, in the criminal cases of business secret involving infringement of know-how, it not only requires the lawyer to have sturdy foundation of law and rich practice experience, but also requires the lawyer to understand quickly the basic characteristics of the know-how in the case in a short time. Only by these means can a lawyer protect the client’s legal rights and interests.

Authored by: Zhong Yi, Attorney at Law - Shanghai Runhe Law Firm